Virginia Bill Could Affect Commercial Credit Reports

The current version of a bill in the Virginia House of Delegates, HB 2198, would require commercial credit reporting agencies to identify their sources of "negative information" when they provide a copy of a report to its subject. This would mean that Virginia buyers would know the identities of the sellers that shared any of their negative payment history with a commercial credit reporting agency should they choose to dispute the information on their report.

However, according to the office of Delegate Michael Watson (R-James City/York Counties), the bill's chief patron, and other industry sources, an amendment to the bill that would eliminate this requirement is forthcoming. The text of such an amendment has yet to be made public.

Still, the bill would also require agencies to provide Virginia businesses access to a free annual credit report and would allow the subject of a commercial report to dispute parts of their report that they believe are inaccurate. After receiving the subject's complaint, the commercial credit reporting agency would have 30 days to either delete the statement or include a note in the report saying that the subject of the report has disputed a particular piece of information.

The bill originated from a series of meetings held between Virginia Delegates and the Virginia business community, wherein business owners complained about a lack of access to credit. Many companies raised their concerns about negative information in their commercial credit reports and their inability to view and amend their report without agreeing to purchase a credit report monitoring service for an annual fee. Virginia delegates responded with HB 2198.

Currently the bill has been referred to subcommittee #2 of the Virginia House of Delegates Committee on Commerce and Labor. In addition to Delegate Watson and the bill's co-chief patron, Delegate Christopher Head (R-Botetourt/Roanoke Counties), HB 2198 has 13 other Republican patrons and one Democrat patron.

Stay tuned to NACM's blog and NACM's eNews for updates on this legislation. If you have questions about the bill, please send an email to jakeb@nacm.org.

NACM's Manual of Credit and Commercial Laws continues to provide essential information for credit professionals, but now in a highly flexible and more affordable formatâ€”four volumes that may be purchased separately or as a comprehensive set.

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Talk of the emergence of the BRICs (Brazil, Russia, India, China) as a bloc of economic powerhouses that was purportedly "here to stay" may have dominated the landscape for the past several years, but such confident talk has noticeably faded. It's also noteworthy just how difficult, if not unfair or misleading, it is to continue looking at them as a group, since the nations demonstrate more and more how little they have in common.

"The BRICs are so 2005," said Ludovic Subran, chief economist at Euler Hermes and keynote speaker for FCIB's International Credit and Risk Management Summit (Prague) in May. "People are still interested in the BRICs, but they're getting saturated. They've reached their limits in growth rates. Now the question is how they are each going to handle it. What's next? It's really about moving forward."

Seemingly untouchable as recently as two years ago, each of the emerging four BRICsâ€”as well as the temporary, unofficial fifth country (South Africa)â€”have watched their growth rates drop noticeably, though nowhere near recessionary levels:

BRAZIL â€“ The transition to the leadership of former far leftist Dilma Rouseff seemed to go well at first, but initial concerns from the domestic and international business community that growth levels would come to a crashing halt under her administration are proving somewhat accurate, at least in the short-term. Drastically lower demand from European Union trading partners hasn't helped.

RUSSIA â€“ Transparency, or the lack thereof, and corruption in the business and government sectors remain massive problems. And the return (if he ever really left) to power of Vladmir Putin has left investors, credit grantors and advocates for civil rights all concerned.

INDIA â€“ Once the hot destination for outsourcing, India is starting to lose that industry advantage quickly as its now-trained workforce demands much better compensation than that of competitors in Southeast Asia or Eastern Europe. It also still relies heavily on imports.

CHINA â€“ Unquestionably the best off of the bunch, but it is troubling that they showed less of an ability to ramp up growth rates quickly after trying to cool off inflation last year. Moreover, with massive population growth, it is vital to achieve near double-digit growth to foster enough employment for the populace.

Subran believes it's long overdue for people to start analyzing each nation independently from the others based on their own impact on the global economy, growth, risks, opportunities, global supply chains, values of currency and on down the line.

"You cannot talk about emerging countries, like the BRICs, as a groupâ€”it doesn't work this way anymore," he said. "You'd never talk about the U.S. in a regional context with Canada."

- Brian Shappell, CBA, NACM staff writer

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Enjoy a 360Â° view of Letters of Credit in three days during FCIB's upcoming Executive Development Webinar Series events.

On Feb 14, 2013, Trade Technologies Inc. presenters, Sherri Lane and Charlie Kelly, will present LC 101â€”Basic Letters of Credit discussing credit risk, the nuts and bolts of the LC process, and how to avoid discrepancies.

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Credit Card Surcharges Now Legal, but Tread Carefully

As of January 27, merchants were technically allowed to begin surcharging their customers for paying with a credit card. However, there's much more to this process than simply tacking a fee onto every credit card transaction.

According to the terms of the settlement of a seven-year, $7.25 billion antitrust case between Visa and MasterCard and a group of retailers, following the agreement's preliminary approval, Visa and MasterCard had 60 days to amend their no-surcharging policies that they imposed on card-accepting companies. The companies did so, and now merchants are within their rights to pass on their credit card processing fees to their customers, as long as they have met a series of conditions.

First, any surcharging activity has to wait until at least 30 days after the merchant has alerted both Visa or MasterCard and its acquiring bank of its intention to charge such a fee. "There's a 30-day notice and a number of things that are required," said Ron Clifford, Esq., an associate at Blakeley & Blakeley, LLP, in an interview just after the original settlement was announced last year. "What we've been telling people is to count out 30 days, serve your notice to the extent that you intend to pass that surcharge along to your customer, and then when that 60th day hits, you can start charging it."

Of course, none of this applies in states where surcharging is illegal. Companies accepting credit cards in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas cannot legally pass down this fee to their customers.

Sellers in states other than the ones listed above, in addition to meeting the notification requirements, must also cap the level of the fee that they charge to their own acceptance cost. For merchants imposing a brand-wide surcharge, the fee is limited to the lesser of their average effective interchange rate or the maximum surcharge cap, established at 4%. Merchants imposing a product level surcharge, meaning a surcharge for specific types of Visa or MasterCard products, can charge only what it costs to accept that particular product.

The fee must also be disclosed to the customer at the point of sale, and preferably ahead of time too. Regardless, it is vital that merchants speak with their general counsel and their acquirer about what rights they have before levying any surcharge on their card-using customers.

- Jacob Barron, CICP, NACM staff writer

NACM Can Help Before Collection Litigation is Necessary

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UAE Near Ready to Unveil Bankruptcy Revamp

The United Arab Emirates appears nearly ready to introduce a comprehensive set of bankruptcy laws to improve an existing process that most argue leaves much to be desired, especially for those international companies granting credit to debtors based in the Middle Eastern nation.

The UAE has been refining a rough draft of laws that was worked up about two years ago. It is designed to offer much-needed clarification and updating to its mandate on commercial transactions passed 20 years ago. Officials from the UAE's Ministry of Finance have said publicly that a key area being amended is the old law's treatment of insolvent company boards/proprietors in a criminal sense, rather than through a civil court process.

The need for a more transparent and functional bankruptcy code in the UAE was underscored when the then-booming commercial real estate industry took a noticeable dive in 2007 and 2008, much like many well-developed economies in the Western world. Since then, the UAE has ranked outside of the top 100 in various studies, including one from the World Bank, tracking the ease of business collections in situations of insolvency. The new bankruptcy laws, which as yet have no timetable for implementation, are expected to help significantly in that area.

The UAE has also continued to work on transparency improvements for the business community. The UAE again showed progress in Transparency International's annual Corruption Perception Index (CPI). In the latest study released in late 2012, it ranked 27th, ahead of Spain and South Korea, and not too far behind France and the United States.

- Brian Shappell, CBA, NACM staff writer

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Economic Growth Takes Hit with Fed, Fourth-Quarter Data

Perhaps the much-maligned status quo wasn't so bad, from an economic perspective. Slow, lackluster growth levels had been the norm over the last couple of years. However, information handed down by the Commerce Department and Federal Reserve January 30 finally showed change in the form of troubling backtracking.

The Commerce Department announced that fourth-quarter economic growth declined 0.1%. While the decline barely entered into negative territory, it marked the first time contraction has been officially reported since 2009. Among the notable reasons: less buying of inventory by businesses and a reduction in exporting activity. Market watchers had been expected a full percentage point of growth, making the news a bit of a shock.

Hours later, the Fed's Federal Open Market Committee said that economic growth had "paused," trying to pin the disappointment on "weather-related disruptions and other transitory factors." This differed from the broken record messages of moderate economic growth the FOMC trotted out after several consecutive meetings. The committee also noted "somewhat" acceptable inflation levels prone to energy volatility, rather than low ones. The FOMC did note that it anticipated both areas to rebound to the previous ranges in the short-term and ongoing.

The Fed's voting members opted to keep its target for the federal funds rate at a "historically" low range of between 0 and 0.25%, which is expected through 2015 based on previous statements, while also continuing its asset purchases designed to support a faster economic rebound:

"The committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities into agency mortgage-backed securities and of rolling over maturing Treasury securities at auction."

- Brian Shappell, CBA, NACM staff writer

CBF Designation Requirement Changes

The NACM Education Department has made a change to the Credit Business Fellow (CBF) designation requirements. In an effort to address the changing needs of today's credit professionals, the Financial Statements: Interpretation and CreditRisk Assessment course has been eliminated from the CBF designation requirements. Only two courses are now required to qualify for the CBF exam: Business Law and Credit Law.

Please contact the Education Department at 410-740-5560 or education_info@nacm.org with any questions about pursuing your professional designation.